U.S. Central Credit Union, stuck without a manager and desperate for capital, has been slapped with the government's second-lowest performance rating, industry and government sources said last week.

The National Credit Union Administration on May 25 assigned a Camel 4 rating to $18 billion-asset U.S. Central, which acts as the industry's primary liquidity center.

The agency, which insures the Kansas-chartered institution, knocked U.S. Central because it lacks a permanent chief executive and because it was having difficulty meeting NCUA's reserve requirements, the sources said.

An agency spokesman would not comment on U.S. Central's Camel rating, but he admitted that an examination that started Feb. 28 uncovered problems.

"We believe there are matters that management needs to address," said Bob Loftus, the agency's director of public and congressional affairs. "We also believe these are things that can be quickly and easily addressed.

But "the assets and investments are excellent and are appropriately structured to provide adequate liquidity for members' needs," Mr. Loftus said.

Chuck Purvis, acting chief executive of U.S. Central, also would not comment on the group's Camel rating. Mr. Purvis did say U.S. Central was working on a capital-raising plan with the NCUA and the Kansas regulator. A proposal should be out in July.

The Camel system grades institutions according to their capital, assets, management, earnings, and liquidity on a scale of 1 to 5, with 5 being the worst score.

U.S. Central received grades of 4 on the capital, management, and earnings components, but earned the best score on its assets and liquidity, sources said.

U.S. Central has been without a chief executive since James R. Bell quit in March. Mr. Bell blamed excessive meddling from the Credit Union National Association for his abrupt exit. CUNA officials control five of U.S. Central's nine-member board.

Mr. Bell said trade group politics interfered with U.S. Central's business operations, including its attempts to build reserves.

"We are behind on resolving our capital problem. We are behind on developing our risk management control process," Mr. Bell said in his March 6 resignation letter. "These issues are critical to U.S. Central's improving its safety and soundness, and even its continued viability."

The NCUA last year approved a regulation that, come Jan. 1, will end trade group control of corporate boards.

In an interview last week, Mr. Bell blamed the rating on the trade group's involvement.

"I'm not surprised at all that NCUA gave it that rating," he said. "It sends a message to U.S. Central that it needs to hear: Get on with business. You just can't stabilize the company until you get the politics out of it."

Whoever leads U.S. Central will be saddled with the task of building its capital.

U.S. Central's capital-to-assets ratio stands at 1.1%. While the regulator does not currently impose a minimum capital standard on U.S. Central, the liquidity center must meet certain reserve requirements.

Depending on their size, corporates must reserve 20 to 25 basis points of their average daily assets. But U.S. Central, operating under a waiver that was renewed in December 1994, reserves only 10 basis points of its average daily assets.

Sources said U.S. Central was funding its reserves from undivided earnings, hurting its profitability.

Under an NCUA proposal now out for comment, U.S. Central would have to reach a capital ratio of 4% by 1998, a hefty task.

For example, U.S. Central currently has $14 billion of net average assets and $220 million of primary capital. The proposal requires $560 million of capital for the same amount of assets.

"They (regulators) are interested in seeing us aggressively moving forward with a plan to build capital," said Mr. Purvis.

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